Part 5 of 5 Bagholder Stocks Just Do It

Part 5 of 5: Bagholder Stocks - Just Do It

With the last workday of the week comes my final “bagholder” stock feature—Nike ($NKE (+0,26%) ). With a loss of about 23% (just under 10,000 euros), it’s actually hardly a “bagholder” stock at all. But since I think the turnaround will take a little while longer, I’ve put it on the list anyway! 😉

👟 Quick Profile

There’s really not much to say about Nike. I don’t think there’s anyone in the world who doesn’t know the brand. In addition to the core brand, the group also includes Jordan Brand and Converse. Its business ranges from athletic shoes and apparel to sports equipment and direct sales through its own stores and online shop.

📊 Fundamental Data

Stock price: approx. $34.75
P/E ratio (TTM): approx. 16.6
Forward P/E: approx. 25.5
Dividend: $1.64
Dividend yield: approx. 4.7%
Revenue FY 2026: $46.4 billion
Net income FY 2026: approx. $3.1 billion

📉 How is the business performing right now?

The latest figures for the first quarter of fiscal year 2027 are rather sobering:

Revenue: $11.2 billion (-4% year-over-year)
Nike Direct: $4.1 billion (-8% year-over-year)
China: still one of the company’s biggest challenges
Gross margin: 42.8% (+0.6 pp)
EPS: $0.48

The problem is that Nike Direct—that is, the company’s own sales channels, including its online business—continues to struggle. Nike has therefore announced “Pace,” a new multi-year restructuring program. The goal is to save $2.5 billion by fiscal year 2031. This includes further job cuts and a restructuring of the regions.

🤔 Why might the stock be a good buy?

1. The brand remains extremely strong.
Nike enjoys global recognition, sales strength, and an enormous reach in the sports world.

2.
The restructuring could pay off. The Pace program is designed to improve the cost structure and make the organization more efficient. If it succeeds in reducing costs sustainably, it would bring EPS—and thus the P/E ratio—back into acceptable ranges.

3. Expectations are now low.
At a share price of around $35, a great deal of pessimism is already priced in. Should Nike stabilize its revenue growth in the medium term, a revaluation could follow. The market currently doesn’t expect much more.

4. The company continues to pay a dividend.
The yield is currently around 4.7%. That’s nice, but of course not a sufficient reason to buy a stock if the company’s operating performance continues to deteriorate.

⚠️ Why is the stock still so cheap?

China remains a real problem. There, Nike is suffering from lower customer traffic, high inventory levels, and intense discount pressure. In the first quarter, revenue in Greater China fell by 26%. This, of course, also rendered the forecast for fiscal year 2027 obsolete. Revenue is now expected to decline by a high single-digit percentage. Adjusted earnings per share are projected to be between $1.15 and $1.35. So things will get worse for now before they (hopefully) start to improve again starting in 2028 or 2029!

The bottom line is that the turnaround will take time. The cost savings from Pace are expected to unfold over several years. Further job cuts have been announced, and the problems at Sportswear, Jordan Brand, and Converse have not yet been resolved.

🎯 My Bagholder Rating -> 7/10 Bagholder Points

For me, Nike is a classic turnaround bet—though one that will require patience. Nike is a global brand with enormous reach, but strategic mistakes in the past have led to relatively rough waters operationally... and it will take a few years to correct that.

The appeal lies in the fact that expectations are low, and stabilization in China, new successful products, and better margins could make a big difference.

I’m (still) comfortable with my entry price of just under 40 euros. Over a 5-year horizon, I can definitely imagine the price doubling from this level—which would amount to just under 20% per year, plus the dividend. 😉

Felix@Shareholder

I think a doubling in 5 years is too optimistic. Expectations were already at rock bottom last year—yet the stock price has been creeping closer and closer to that level. I can easily imagine that we'll hit €20 first before things start moving upward here....

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Part_Time_Joe@Part_Time_Joe

@Shareholder That's possible, too! It wouldn't be the first time I've been wrong… 😂

But at 20 euros—or on the way there—I'd keep buying more. I see a rare opportunity in Nike from a medium- to long-term perspective.

Kurz@MrKurt89

No one wants stocks when they’re falling or trading at low levels. People talk about “junk,” “falling knives,” and a lack of a turnaround. The reverse is also true. Why would anyone sell a stock with booming profits and steadily rising prices? In such phases, you often hear the advice to “cut your losses and let your winners run.”
Personally, I like to act in direct opposition to the prevailing view of the crowd. That’s why I sold my Nike position on December 1, 2021, for a nice profit. Now the stock is down about 80%, though sentiment still isn’t bleak enough. Nevertheless, I’m on the verge of re-entering the position. The turnaround usually begins when absolutely no one expects it and stocks are considered uninvestable. There are countless examples of this: Bayer, Intel, Exxon, BAT, Chinese stocks, and—for slightly older investors—airlines and aircraft manufacturers in 2020, as well as bank stocks in 2011.
Everyone plays the stock market game in their own way; you just have to be able to sleep soundly at night. And with about 500 Nike shares, I’ll soon be sleeping very well indeed.

@MrKurt89 I completely agree with you there. In the past, I’ve also had a few stocks where this approach worked well for me.

For example, one stock I still hold—and that nobody wanted during the pandemic—is Bijou Brigitte $BIJ

But—and I think this is also part of the truth—it doesn’t always work out. Sometimes the market is right after all. The important thing is that, at the end of the day, it all works out! 😉

Homer@Simpson

I'm a Nike fan myself and was invested in the stock for a while, eventually selling it at a loss when it was around 60–70 euros.
What makes me wonder is that there was a World Cup in the U.S. this year, and Nike wasn't able to capitalize on it.

@Simpson Congratulations on your sale! Looking back, it was definitely the right decision! 👍🏼

There are signs that the World Cup definitely helped Nike. Revenue in the U.S. rose by +2% in the corresponding quarter. (Wholesale revenue +9%, footwear revenue +1%, footwear volume +2%, apparel +6%). Unfortunately, the World Cup alone isn’t enough to mask the problems. Especially since Nike isn’t the only outfitter and soccer is just one segment.

Well, World Cup or not, in the end, Nike has to succeed even without special factors like major sporting events!

Alex@A1bund7

Why a turnaround? What is the problem, and has it been solved or is it being solved?

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@A1bund7 In short: declining revenue and margin pressure. In the past, Nike relied too heavily on direct-to-consumer sales, and the shelf space that became available went to the competition.

At least in response to the margin pressure, the company is implementing cost-cutting measures. Inventory is being reduced through discounts, but this only fuels the margin pressure. However, the company has not yet managed to turn around its revenue... quite the contrary.

@Part_Time_Joe That's only half the story. The Chinese simply rely on other brands—and, above all, their own. Why would they want to win them back now?